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June 2015

A new report states that the differential between manufacturing costs in the U.S. and China are now only 5%, thanks to the continued annual mandated wage increases in China. China has just lowered interest rates and loosened some banking regulations to spur its economy.

What do YOU think the U.S. government must do to reignite electronic manufacturing in the homeland? Do you think that it is possible given the size of the markets in China, India, and elsewhere? See Dick Otte's well-thought out remarks on our Comments & Discussion page!

Send us your thoughts and comments.

What kind of supply chain opportunities will emerge for wearable electronics? Forecasters are saying that the market will surpass $18 billion in just 5 years! That number is larger than the entire current global airline industry!

They will certainly include flexible and stretchable substrates; abrasion and moisture resistant flexible as well as rigid conformal coatings; curved screens, synthetic sapphire screen covers; bendable display screens; new conductive and resistive fine screen inks; conductive fabrics; printed batteries and semiconductors; heat dissipating fibers or substrates; flexible batteries; self energizing (microbe, heat or solar driven) batteries; graphene-based filters conductors and displays; flexible printed transmitters and receivers; printed sensors (ECG); flexible conductive adhesives; reel-to-reel processing, assembly, and direct imaging equipment with better than 15 micron resolution and 2.5 micron repeatability; new test equipment - to mention just a few.

Did you know that China buys more than half the world’s semiconductors sold each year, but only produces 10% of local demand? Its government is now stating that it plans to invest up to $160 billion over the next 10 years to develop chips. The cost to build a state-of-the art chipmaking plant, which could become obsolete in just 5 years, is $5 billion. China will need foreign experience and help to succeed. In the interim, foreign chipmakers are increasing their investments to upgrade its Chinese plants and in state-run mobile chipmakers. (Source: Bloomberg Business, June 25).
Think about it! 10 years is really a very short time. The world can change dramatically in that period.

There weren't any new industry shattering products at the JPCA show according to our colleague D. Numakura. There were, however, a few new technologies targeting specific applications. Many companies there stated that they are focusing a lot of their R&D toward the wearable electronics supply chain.

Murad Kurwa, Vice President of Engineering at Flextronics International, will present “Wearables Technology - The Next Manufacturing Wave” to the attendees of SMTA International's Evolving Technologies Summit on September 28.

Platform Specialty Products will acquire OM Group’s Electronic Chemicals and Photomasks businesses by the end of this year. Operations are expected to be merged into the company's MacDermid subsidiary.

One can only wonder if any other larger consolidations are in the offing. There aren't many possibilities left. We have been apprised of a number of smaller M&A activities on all sides of the buy-sell-spin-off-JV equation.  It will be interesting to see what the electronic packaging-box build supply chains look like in 3 to 5 years. How many historic names will join those that have vanished in the last decade?

New American source for laser drills?

Nano System in New Hampshire is building a custom UV/CO2 laser for Nova Drilling Services of Santa Clara California to meet increased small via drilling requirements of its customers.

May 2015

China launched three new "free trade zones" (FTZ) and announced the quadrupling of the first one established in Shanghai in September 2013. The new FTZs will be in Guangdong, Tianjin, and the southeastern province of Fujian.

PCB fabricator Unimicron Technology losses of $18.92 million in the first quarter of 2015 were more than double those of a quarter earlier. The company also reported sales of $435 million for the first quarter of 2015, down 19% from a quarter earlier and 1% from a year ago 

Is it time to review your markets, goals, and position in the electronic packaging supply chain?

Opportunities abound. The overall market is huge. But, where do YOU fit?

According to Mike Buetow 's column this month in PCD&F/Circuits Assembly the EMS market reached $490 billion last year, up about 11% based largely on demand for automotive applications and handheld assemblies. This excludes captive production.  Foxconn alone accounted for nearly 28% of the world's EMS business. The next 49 largest ranked companies accounted for approximately another 40% leaving the rest of the world's  EMS companies a $158 billion market from which they gain their market share.

Do you know where your company’s wares fit?* Upon what do they depend (specifications, your on suppliers, compatibility with other suppliers and products used by your prospects and customers)?  What are the performance requirements (standards, environment)?  Who are the competitors and what are their strengths and weaknesses? What is the competitive situation (performance, cost/price, delivery system, inventory, service)? What are the requirements to maintain your position or break into a new market (with either in-kind or not-in-kind technology)? What the areas of dissatisfaction that customers/prospects have that can be exploited by improved or better supplies or a different manufacturing system?  Do you need the approval or support of a major OEM (e.g., Apple, Google, Ford) to “pull” you through? Can you succeed with your product at just the fabricator or SMTA level?

What are your strategies? Long term? Short term? Will you establish new alliances and joint ventures or programs? Will you target new, improved, less expensive items for existing markets, or concentrate on developing new not-in-kind technologies? Will you focus on potentials in the new emerging wearable segments?

*Making holes conductive" in  printed circuit fabrication (electroless copper, graphite, carbon, and organic systems) accounts for a little more than 0.1% of this total. Substrates (laminates and prepregs) are a little more than  1.7% of the $490 billion.

Foxconn, with more than two dozen plants in China is planning to spend a "few billion dollars" over the next 5 years to build 10+ EMS facilities in India.  China's Xiaomi has already announced their intent to build a facility there.  Chairman Terry Gou said that Foxconn will work with India's smartphone maker Micromax Informatics as well as Chinese customers. The newly announced plans prompted speculation as to the reasons why Foxconn recently closed a mobile phone operation in southern India.

Leading edge (14nm) production in Texas and New York - but where are the Americans?

Samsung Semiconductor said that it will have 10-nanometer FinFET chips in volume production by the end of next year. The company showed a 12-inch wafer with what it said were 10nm FinFET semiconductors at an event in San Francisco.

Over the next 18 months, Samsung will provide process design kits and multi-die wafers for the 10nm FinFET chips.  Meanwhile the company is ramping up volume production of 14nm FinFET chips in South Korea and Austin. Global Foundries will also implement the Samsung 14nm FinFET process at its chip-making facilities in New York State.

A critical moment for China?

China's growth rate is continuing to slow. Companies that once were enticed by China's welcoming incentives and low labor rates are moving out. This emigration is even beginning to include some of its "hi-tech" operations. These companies will not return.  The mandated labor rate increases coupled with increased social costs and elimination of incentives to locate new operations in China will cause a further reduction in the growth rate - one that cannot be offset by minor reductions in interest rates. Increased automation may cause long range unemployment or underemployment that must be offset with new business.

The current global economic situations, currency fluctuations, work force availability pale in significance to China's power to control virtually control all major aspects of  its own country including inflation. What is needed is a rapid decision to stop "killing the goose that laid the golden egg" behavior. To reinvigorate its economy it must cease the nearly 20% annual labor rate increases of the past few years.

According to an AP report, China, under President Xi Jinping, is also starting an Asian Infrastructure Investment Bank and has enlisted 57 countries to sign up. Such a venture is designed to broaden China's practice of using its state-owned companies and its workers on foreign capital projects. Britain, France and Germany, members of the World Bank and Asian Development Bank (WB&ADB) have broken with Washington and are seeking membership. The U.S. and Japan, leading shareholders of the WB&ADB, have expressed concern over the new bank's governance standards and the types of projects it might finance

On the other hand, what countries will benefit from the never-ending search for lower manufacturing sites? The Philippines (again?)? Mexico (again?). Vietnam (too late - too busy?)? India (need for infra-structure?). Indonesia? Malaysia? Will China's emerging electronics "giants" also seek off-shore sites to compete globally?

And, what actions will the U.S. and other Western economies institute to take advantage of the opportunities? Or, are they too internally divided to recognize, let alone take advantage, of the current situation?

Jabil Circuit, Inc. has secured approval from the Penang State government in Malaysia to purchase 20 acres of land at the Batu Kawan Industrial Park to support expansion plans. The company plans to further develop the Jabil Penang facility to support the company’s growth strategy in the Asia-Pacific region.
Jabil says that it chose Penang to expand its Malaysia operations due to the local availability of highly skilled talent; the mature local supply chain, which has around 3,000 well-developed suppliers from a variety of sectors; and the region’s excellent utility services. It plans to create 2,500 new skilled jobs there during the next 5 years.

MFLEX (Multi-Fineline Electronix) reported net sales for its first quarter ended March 31, 2015 of $149.1 million, an increase of approximately 27% more than the same period last year. The company's largest customer accounted for 65% of net sales and to newer customers accounting for approximately 30%, or $45.2 million. Two of these accounted for about 27% of sales for the quarter.
Net income $9.1 million for the period compared to a net loss for the same period last year. The The company generated $20.2 million in cash flows from operating activities during the first quarter. It had cash and cash equivalents of $155.4 million on March 31, 2015. MFLEX continues to maintain a strong balance sheet with no debt.

The age of the IoM in the IoT is upon us!

Two bold quotations from John Dulchinos, Jabil’s vice president of digital manufacturing: "...the model that’s served the industry so well for decades – locating in low-cost labor regions has reached its end. We’re seeing a greater demand for higher-skilled labor, driven by the reliance on digital and advanced technology, requiring that we rethink how we deploy automation in our operations." and "At last we’ve moved beyond the traditional manufacturing robot, and are seeing real world applications today of smart, collaborative robots that deliver three very key capabilities to advance manufacturing."

TTM and Viasystems announced that the companies have received notice from the Committee on Foreign Investment in the United States ("CFIUS") that it has concluded its review of TTM's proposed acquisition of Viasystems and determined that there are no unresolved national security concerns with respect to the proposed transaction. The proposed acquisition remains subject to review by the United States Federal Trade Commission TTM expects the acquisition to close in the second quarter of 2015.